Discussion Paper Details

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Title: Setting Standards: Information Accumulation in Development

Author(s): Daron Acemoglu and Fabrizio Zilibotti

Publication Date: May 1997

Keyword(s): Agency Costs, Development, Incentives, Information, Relative Performance Evaluation, Risk Sharing and Sectorial Transformations

Programme Area(s): International Macroeconomics

Abstract: This paper proposes a model in which economic relations and institutions in advanced and less-developed economies differ as these societies have access to different amounts of information. This lack of information makes it hard to give the right incentives to managers and entrepreneurs. We argue that differences in the amount of information arise because of the differences in the scale of activities in rich and poor economies; namely, there is too little repetition of similar activities in poor economies, thus insufficient information to set the appropriate standards for firm performance. The model predicts a number of institutional and structural transformations as the economy accumulates capital and information.

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Bibliographic Reference

Acemoglu, D and Zilibotti, F. 1997. 'Setting Standards: Information Accumulation in Development'. London, Centre for Economic Policy Research.